Weather Shocks and the Sugar–Ethanol Nexus in Colombia

Jaime Andrés Carabalí, Luis Angel Meneses Cerón (), Alex Pérez Libreros, Blademir Quiguanas, Dayra Cabrera and Alvaro Pio Guerrero
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Jaime Andrés Carabalí: Faculty of Social and Economic Sciences, Universidad del Valle, Cali 760001, Colombia
Luis Angel Meneses Cerón: Faculty of Administrative, Economic and Accounting Sciences, Universidad Cooperativa de Colombia, Cali 760001, Colombia
Alex Pérez Libreros: Department of Economic Research, Banco de la República de Colombia, Bogotá 110111, Colombia
Blademir Quiguanas: School of Legal and Political Sciences, Universidad Nacional Abierta y a Distancia, Bogotá 110111, Colombia
Dayra Cabrera: School of Legal and Political Sciences, Universidad Nacional Abierta y a Distancia, Bogotá 110111, Colombia
Alvaro Pio Guerrero: Faculty of Administrative, Economic and Accounting Sciences, Universidad Cooperativa de Colombia, Cali 760001, Colombia

Sustainability, 2025, vol. 17, issue 15, 1-19

Abstract: The connection between sugar and ethanol prices is in line with concerns about the connection between oil and food prices. This paper studies the nexus between Colombia’s ethanol and sugar prices and the role that weather shocks play. Data on production and prices from the sugar mills and climate data on precipitation and temperature are used to estimate two ways to capture the relationship between prices and the role of weather shocks. First, a reduced-form estimation is made, where the study finds evidence of the pass-through of the international price to domestic prices and how high precipitation and temperature shocks increase prices. Then, the study addresses potential simultaneity problems between prices and estimates a VEC model with exogenous variables such as weather shocks. Results show that all domestic prices are affected by the international price, and the international price is affected by the white sugar domestic prices. Additionally, sugar prices react to shocks in ethanol prices, but ethanol prices do not react to shocks in sugar prices. Finally, weather shocks affect sugar prices, with daytime temperature shocks being the most damaging.

Keywords: sugar cane; sugar price; ethanol price; weather shocks; Colombia (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:15:p:7125-:d:1718649

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